Act Fast — These Energy Tax Breaks Are Going Away

Another expiring energy tax break is the Alternative Fuel Vehicle Refueling Property Credit. It’s worth up to 30 percent of the cost of installing an electric vehicle charger at your home, up to $1,000. It ends June 30, 2026.

“For folks who went out and got a new EV or used EV, they can take their time to get the charger,” Pierce says.

What upgrades are eligible for the credits?

To qualify for the home energy tax credits, the equipment you install must be new and meet the standards listed below. (For good measure, you can ask manufacturers whether the materials or systems you’re considering buying qualify for the tax credits, Steffen says.)

Qualified expenses for the Energy Efficient Home Improvement Credit

Building envelope components

• Exterior doors: Must meet Energy Star requirements.
• Exterior windows and skylights: Must meet Energy Star Most Efficient certification requirements.
• Insulation and air-sealing materials: Must meet International Energy Conservation Code (IECC) standards.

Home energy audits

An energy audit entails hiring a professional who uses specialized equipment, such as infrared cameras, to examine your home and create a report with personalized recommendations for energy-efficiency improvements. “It’s like a physical for your home,” Pierce says. It must be conducted by a qualified home energy auditor. Contact your utility provider or local government energy office to find one in your area.

Residential energy property

Qualified expenses must meet the Consortium for Energy Efficiency’s highest-ranking level for energy-efficient performance. The cost of upgrading your breaker box and other electrical components to support the following appliances and systems also qualifies for the credit.

• Biomass stoves and boilers
• Central air conditioners
• Electric or natural gas heat pumps
• Electric or natural gas heat pump water heaters
• Natural gas, propane or oil water heaters
• Natural gas, propane or oil furnaces or hot water boilers
• Electric panel upgrade to support residential energy property

Qualified Expenses for the Residential Clean Energy Tax Credit

• Battery storage technology: Must have a capacity of at least 3 kilowatt hours.
• Geothermal heat pumps: Must meet Energy Star program requirements at the time of purchase.
• Solar panels: Solar roofing tiles and solar roofing shingles qualify.
• Solar water heaters: Must be certified by the Solar Rating & Certification Corporation or a comparable entity endorsed by the government of the state in which the water heater is installed.
• Fuel cells: Must have a power output of at least one-half kilowatt of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30 percent.
• Wind turbines: No special requirements. 

For more details about claiming these credits, see the IRS Instructions for Form 5695 or consult your accountant.

Which upgrades should you prioritize?

Pierce recommends getting a home energy audit and using the report to identify which energy-efficiency upgrades to prioritize.

Home energy audits cost, on average, $437, according to the home improvement marketplace HomeAdvisor. But most qualify for the Energy Efficient Home Improvement Credit, which offsets up to $150 of the cost. (In addition, many utility companies offer rebates for home energy audits.) 

If you can afford to purchase and install solar panels, now is an opportune time to do it, before the 30 percent tax credit expires at the end of the year. The average 12-kilowatt home solar system costs $29,649 to install without the credit, according to solar marketplace EnergySage, but the average payback period is only 6 to 12 years.

To see if your home is a good candidate for solar panels, enter your address into Google’s Project Sunroof. This tool uses Google Earth imagery to determine how many hours of usable sunlight your house receives each year, the recommended size of a solar installation for your roof and the estimated net energy savings over 20 years.

Line up installation ASAP

Don’t wait to find a contractor. Many are already booked solid through the end of the year, says Emily Walker, director of content and insights at EnergySage. You may need to do some digging to find one available in your area.  

You can get quotes from prescreened solar and heat pump installers at EnergySage.com. Rewiring America has a tool you can use to find contractors for a range of projects that qualify for the clean energy tax credits. You can also shop around for contractors on marketplaces like Angi, HomeAdvisor, Thumbtack and Yelp.